Call for stamp duty overhaul

The Government needs to radically overhaul stamp duty to make it fairer and help support the faltering housing market, an industry body has said.

The Royal Institution of Chartered Surveyors (RICS) said the current system was "unfair, ineffective and long overdue for reform".

It is calling for the current 'slab' tax regime, to be replaced by an incremental one, in which higher rates are paid on only a portion of a property's value.

It also wants the tax to be abolished for first-time buyers and retired homeowners trading down the property ladder in order to release equity, or for grants to be introduced to offset the cost.

Stamp duty is currently charged at a rate of 1% of a property's value on homes worth between £125,000 and £250,000, rising to 3% on ones worth between £250,000 and £500,000 and 4% on properties sold for more than this level.

But RICS said the system distorted the value of property around the thresholds, making it difficult for people to sell homes for just over £250,000 and £500,000 as buyers did not want to pay stamp duty at the higher level.

It added that it also created another hurdle for people trying to get on to the property ladder and discouraged existing homeowners from moving.

It is proposing an alternative system under which no stamp duty should be paid on the first £150,000 of a property's price, with the tax charged at 2.5% between this level and £250,000, rising to 5% thereafter. It added that the the thresholds should be indexed to increase annually in line with house price growth and inflation.

Someone buying a property for £250,000 currently pays £7,500 in stamp duty, but under RICS' proposals this would fall to just £2,500.

The group claimed its system would benefit 99% of people, with only those buying properties for more than £1 million paying more tax.